GCT - Earnings call transcript Q3 2024 | GigaCloud Technology Inc.

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Operator

Thank you all for standing by. Welcome to GigaCloud Technology's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Joining us today from GigaCloud are the company's Founder, Chairman and CEO, Larry Wu; its President, Dr. Iman Schrock; and its Interim Chief Financial Officer, Erica Wei. Iman will provide an overview of our performance and operations, and Erica will discuss our financial results. be session. will there that, a question-and-answer After

As future forward-looking events this conference in statements about call contains materially. and differ and results a actual reminder, nature, may expectations that are

as be When release measures call today's meaning the Regulation with of on the measures will accordance non-GAAP non-GAAP most as financial can required, Additionally, and within directly presented reconciliation a in found comparable include website. of press the SEC financial well in to today's all G. company's measures GAAP calculated

With would Larry I sir. Please like that, call to over for go turn to remarks. the his opening ahead,

Lei Wu

Thank you, and everyone, to today's operator, welcome, call.

third new launch growing headwinds, in bulky successfully navigating unique enhance and The of and path and the numbers of growth to our shown adjusted to strong sellers of these efficiency challenges. streamline BXB record we EBITDA its are This net due Despite and the item globally. operations the buyers ability participants high built industry quarter income is online for very continued since we nonstandard marketplace have big, by followed marketplace. upon the

of Among year. acquisition other House end Noble on to accomplishments, reach the by of track breakeven is our this

Wondersign, expanding exciting path the ahead. we enhancing technology GigaCloud's have or the capability fully we made our Additionally, stores. capture to better doesn't are serve We valuation its through brick-and-mortar current that believe the progress

a Board To on million confidence our X, authorized share $XX our repurchase demonstrate in future, the of XXXX, program. September

to of we open pursuant a at Class ordinary the A As million have market Rule plan an under XXX,XXX approximately consideration total shares of repurchased XXbX-X. repurchase November X, aggregate XXXX, of a in $XX.X

have capital our the on actions commitment, view the as effectively anchored reduce we in total shows value belief shareholder the shares. in one that disciplined performance ahead. lasting to and We issued our with stake many quarters strengthens this we aligned we the creating to line vision are In step and growth, momentum is for long-term shares shareholder's sustainable strong retire with This in repurchased, decisions. to operational journey. plan in this approach Our and potential our building GigaCloud's our of each strategic dedicated

with flow maintain operations, are balance and allowing sheet us very from strong positive future profitable cash debt to generating no We fund a growth.

We solutions. extremely driving to continue progress have what proud this to commerce of and BXB are date leader innovator we a accomplish will e-commerce been technology of as -- year and able

you, Thank everyone, joining us. for

the will Iman. call Now to I over turn

Iman Schrock

us It would manage by we Thanks, to industry for today. Larry. add GigaCloud. clip, fast quarter to headwinds Larry I those We're through great was at welcome especially another like continue as joining those gratified even to my ability a growing mentioned. our

has items transact, platform and GigaCloud to XX, ended a GMV seamlessly XXXX. September become continued for grow for BXB Marketplace our of to powerful proven Because way buyers nonstandard trailing sellers and the our months XX

GigaCloud Marketplace more than year-over-year, Specifically, second our with growth. XX% quarter keeping pace GMV by increased

basis, continue to growth. buyer GMV increases significant which seller drove in and We see our overall

These at to X,XXX. a X,XXX XP our buyer the momentum first grown Meanwhile, crossed has sellers mark now standing Our active appeal. milestones for growing active the and X,XXX. has base time, platform's reflect

marketing adding participation to through include expansion, increase Our our initiatives. XP outreach enhanced marketplace sellers further geographical plans and in

leveraging enhancing users, among We categories subscribed to of expect buyers Wondersign and that to the increase product a referrals are our combination marketplace existing retailers from brick-and-mortar kiosk, active onboarding through catalog others.

XX million XXXX. XP total year XX% September marketplace our the marketplace was a a represents XX.X% of XX, and GMV. ended trailing in months for healthy ago grew seller our GMV This from $XXX

that of over enhancing themselves who buyer with number drive reflecting while primarily a lower network typically volume year, they for spending a with last a begin of compared X.X% QX helping effects build X,XXX recent are platform. trading familiarize mass, the to us Our modest average buyers, the saw all decrease combined XP and value XP incremental strategies large of critical the as onboarding participants,

We're is goods central a encouraged buyers dynamic of to expansion for sellers large hub transact. parcel our by becoming and of and marketplace, connect continued which the and

As more model, fulfilled grow, will benefits ecosystem of efficiency businesses continue confident we're participants this the supplier to experience our drive profitability. empowering to retailing and

we're benefits market GigaCloud's the Revenue region's want from attention and also European Europe to core our reach one balanced of by marketplace regions excited grown strengths, year-over-year and potential. we're call market. that Diversifying for the QX, I this creating to about XXX% is both momentum strong our further growth building different across a ecosystem. has organically in approach

few I the by a year. House breakeven We're would on Noble House. Noble now spend reach end like this on for to of minutes to track

of so it we've recap how impact going will forward. done us a far Here's what and

hard up After build during closing helps had last This off-platform by sales many process bankruptcy existing SKUs. existing year, as the support base, we orders the for placing hit integration inventory acquisition we of which QX and of the prioritized large vendor begin for been our process.

contributions these to operation XXXX making company product not SKUs new While has have diversify top and the been meaningful steady profitability. a supply of bottom offerings contributions of line is help and well-prepared made Having our to existing a products line yet. in critical portfolio the offerings,

SKUs, of Noble diminished of vendors' further new and approximately experienced which company a to harmed an effectively process, new period bankruptcy meeting profitability its year needs. in During the with development without significantly capacity development House extended collaborate

SKUs, of submitted the new our production such, this effort in first we developing integration our As focused on phase orders of second QX and year.

developed more. SKUs keep at typically and started Order has share that As fulfillment trickling furniture mind of that of new each integration in our to Do a and have stage our sampling, plan. manufacturing of to have X months X manufacturing newly shipment. starting ocean starts X for and developed long Phase October, that this in products cycle design, XXX requires approximately develop am I and continue to today, pleased we deliveries

months months identify successful and us Phase be Sales the to on products X will winning coming on ready focus help sizes, for which to and reorder take another identifying with larger sales. X products focus in those will typically X capturing will profitability.

We begin bottom line beginning cycle new Noble the of House and that growth. expect legacy seeing a substantial of to XXXX in profitability will quarter productive product contribution third the initiate operation more from

our broader a Wondersign's to on the tech of more tech advancement advancing transactions facilitating I natural we're and to power with part aligning and for take clients. across about particularly moment our our a also focused is our here Right strengthens platform's stack already a that now, want to GigaCloud. model value driving talk a smoother tech-driven enhances brick-and-mortar upgrade efficiency, board. solid our Wondersign own. how It's Wondersign at addition it

the So with needs. with we're out key advancement coming months, what's Please upgrades, including In to an we'll functionality meet even equipped ahead. better rolling updates keep eye that our to be detailed Wondersign. client for market the

model of a remain continue growth to and we that and unique new buyers business bulky for items. our Marketplace. we and is our excited future more and sellers through big trajectory adding opportunities, about become platform success, sellers unique products, increasing value plan proven for necessary buyers adding more and our We believe GigaCloud Our by the and will

a turn Now results. over more our I to of for will detailed Erica the call financial review

Erica Wei

today. joining thanks and to us everyone Thank Iman, you,

are our be please clarity. that rounded I As third results, quarter keep mind for in all review referencing figures I'll

exemplify amid growth financial third our ability Our of year-to-date results even outside strategy, execute industry is headwinds to to continue and our successfully our heavy control. quarter that

Before briefly to of impact the our details, to anticipated into seasonality our quarterly like trajectory business. diving I'd growth on touch and the

heightened remain holiday our fourth Noble and quarters seasonality, product strongest, second in Regarding demand our QX. from demand by QX outdoor in and driven House

forward, larger as reflects while experienced our resilience companies typical look and scale. reinforces growth This the as trend of important GigaCloud the stability we progression As the recognize for reach to of it's critical and that mature. pace rapid we moderate naturally we reaching business will mass, has it expansion,

quarter for resulted buyers. $XXX number GMV, and XX% revenues and The increases marketplace, our driven by to of in which volume were million. active Total improvements grew primarily market recognition the the to and sales sellers of our third increased Marketplace scale the

the quarter growth our of we revenues. adaptability our saw quarter, Breaking down stream, revenue third strength third and our In underscoring the across significant platform.

marketplace $XXX engagement strong grew from our participants. our to and Service reflecting substantially revenue XP continued from business million, demand

service saw X.X% of cost a stabilizes also from utilized have a freight in more we increase as revenue margin quarter fixed-rate QX that environment. sequentially We significant contracts this in heightened freight ocean

we On continue with product GigaCloud to revenue marketplace. side, XX% as naturally of of healthy from Sales enhanced reach the growth speaks offerings. scale of of our growth year-over-year XP our growth the delivered over our product

engagement with platforms. model, presence resilience effectively XXX%, in third-party an platform by off-platform in expand of us and driven balanced across and markets. growth Our business channels deepen This both volume as we our sales product external positioning e-commerce reinforces the growth of our our the increase

part were X.X% decreased cost of costs of during due elevated second use during sequentially and incurred rate ocean the higher for that Product procured sold where sold. our limited. to costs are the as were procurement of margin products This because quarter was revenue freight quarter is third goods accounted fixed contracts

into we season million up upcoming shipping to cost potentially at during looking When expecting $X.X the of the our that cost margins. temporarily holiday future, compress would structure are ground increased

to those year of starting ends. quarter peak first from costs We decrease expect once season the next

relationships we're and secure a mitigate implementing targeted to our these with approach volatility. rates and manage response, strengthen to In fluctuations favorable providers

to volume, operating invested year. capacity compared last at category, have our and year, Breaking relating General expenses and down by to we this growth compared to as expense expenses to remained by of Driven newly and fulfillment business to X% that increased leased in in our revenue. expenses approximately million strategically and higher increase amounted year expand $XX excess primarily $X centers insurance to marketing fulfillment expenses network. rapid stable prior million due administrative selling rental an

XXXX. increased income year-over-year X than first for $XX Third to XX% grew the quarter to million months year-over-year of and net more $XX million XX%

approximately For to nearly and Japanese rates We million third XX% for foreign gain on growth were the currency the a the quarter, exchange against dollars the which net $X generated depreciation basis primarily million, attributable $XX EBITDA, adjusted U.S. similar quarter. yen to euros. in of third improved

We million, with includes ended cash, which QX restricted investments. $XXX of approximately liquidity a equivalents, cash and cash

our the $XX third quarter, purchase We CapEx for equipment to center racking of infrastructure. ] in million [ for in the primarily and be used fulfillment incurred

with debt-free the remain As we on outstanding Larry sheet liabilities no our to fulfillment earlier, relate centers. borrowings balance primary our mentioned and

would and to ago take that minute began talk from know of tariffs remain topic years diversification and a want these We supply landscapes. several arising manage We to to chain about potential risks central interest changing political journey tariffs business. how impact our a our

exposure our today from more potential market diversifying U.S. By we We the that servicing from supply increases. chain from are and chain, coming supply our overconcentration continuously than tariff is XP Asia. happy limit share to half of Southeast our impact

to When ecosystem chain evolves. suppliers our empowers are business, XP the is providing we it flexible make the foundation to GigaCloud diversified that comes as our a and customers where stay Marketplace market connecting and supply strong and adjustments resellers,

puts to manage We position value are marketplace. provided infrastructure in potential confident to our while tariff that solutions good continuing across by us deliver the and effectively a GigaCloud impacts

I'll close remarks the my our fourth for outlook quarter. with today

We expect total million. $XXX to revenues and range million between $XXX

consider sustained please in to long-term from our the profitability we are drive you earlier. impact mind the As this, mentioned I confident levers temporary keep in Nevertheless, profitability. that margin ability

landscape. our work e-commerce grow common our I we believe to The to leadership sincerely and continues that GigaCloud toward continue in global the can team BXB goals

may continue and challenges. we in to confident we for expertise longer, the resiliency believe navigate face will those model that a temporary significant headwinds our that help our successfully While us extremely macro little some are persist bit

all for questions. joining Operator, we're today. us you ready Thank for

Operator

from comes Koranda Capital. ROTH Matt question first Your Instructions] with [Operator

Matthew Koranda

and just pretty just the the just bit in I going sort maybe then maybe off contribution what's service year-over-year for the fourth quarter. of a fourth that little quarter, sense big more if on It assume to fourth breakdown between starting and wanted between like and might a this product the you a a deceleration gives there mix the So on that quarter organically, for product. House basis. on full And service the outlook get Noble deceleration, imply revenue in looks year,

Erica Wei

for Yes. question. Matt, the thanks

So terms of looking a in few to forward, things think about.

expect to to we and service proportionately, products similar QX. stay somewhat So

towards then on your specifically House. And question Noble

likely Noble separate So already. of continue a -- revenue of somewhere keep disclosure, included against QX QX and from product contributing Do will though to don't this of year that even QX had months Noble of XX% do XX% House in perspective is House product when last XXXX we mind of year terms QX. X between comparing in breakout a for that

Matthew Koranda

Yes.

just maybe did of Could the buyers just about bit onboarding where see getting buyer decent platform? little you then where talk you like the Okay. the ecosystem? side, in Got it. on essentially And a success? step-up service growth of a Maybe pretty we're onto out sort

Erica Wei

Sure.

of furniture we I market, do. sector it do better and what of So understanding getting the the think a big to are a part who has with we

So folks efforts, more and go-to-market ] efficiency, it's more that combination including especially very seeing -- much direct solutions, efficient our referrals more equally cost a important quite it's now the when of also receiving that is [ savings, we're word-of-mouth are right challenging. environment outreach,

Matthew Koranda

I'm those buyers just are Where reselling? curious. Yes. sort mostly of

You of that, they're plugged seeing success. where or into maybe on I just have data where sort guys good and assume, probably would they're growth platforms

Erica Wei

Yes.

be players would that that shopping There's vendors larger also these platforms. on There's lot those like of platforms, folks -- a to that. are and of are some also a lot are from. you So the commerce I So folks big right? it's of those

also have such of a brick-and-mortar very number smaller number as independent and smaller as We e-commerce, a of non-large-scale small well. stores

Matthew Koranda

there. Got as mentioned to last trying maybe Okay. seen And speak product GigaCloud the the get Maybe House so? on it. more like of we've XP on progress side. just or success Curious -- how platform. product think last revenue that I quarter, quarter just the you over Noble then How

Erica Wei

off-platform original hand the plan, that over terms -- also about with of shifting XP goes open right? are what new and in has of in This the executing going more more hand our to up revenue talked see still to revenue We're development. time, expect product stream, Yes. Iman we where earlier slowly into from

seeing now, sales the we're up in see right of and of pick and diversification So initial next -- to deliveries, year. influx pick we terms up more expect

Matthew Koranda

Okay. Got it.

out impact about, we the then marketplace how into on you part the talk typical -- curious the up-front if guess capacity comes view transaction? maybe sellers much On think I of would of to a guess, China? about is I'm don't pay flow take of sort maybe I there. just the through you you much capacity tariffs have [ marketplace, even addressed of how their the your front, the tariff What it guess, everybody in don't I you sellers, on their how title import of of duties. inventory. just a I refresh about And assume ] do third-party

on take effect a us would walk So even higher works. just potential marketplace, take does sort that, the rate that it value and mechanics a be you just through beneficial? of may of order on as how take Maybe the so it

Erica Wei

Sure.

So there. by a one in answer order. into one I'll few them to questions try packed one

the think us something So from customers we're a are out So accordingly potential is of more our coming we well. or XP impact kind flexibility. yes, compared our perspective, China first clients platform the about as the off, And Southeast also side, that's to participants seller more on all Asia, right? a to encouraging that of gives seeing little on

However, not make is something the lot because of terribly in limitations, is supply a the as that seeing a a -- of thing, be of a it nor easy lot we're want terms I XXX% it's but folks moved inherent to move where of located, that not it's clarify right? chain could do

flows in how this terms of then And through us. mechanically,

product, that drayage marketplace, that's the component manufacturing would typical incurred tariff the that then a warehousing the So would cost incurred ocean be added on cost XP there There that of And would itself, product leaving for listing freight added include as aforementioned. who's the right? services the costs to and we about be seller think and a to facility.

fulfillment, when impactful is think expect, increase thinking U.S., it, XX%. large if the is the call the when in seller Does make jump you that cost hypothetical that buyer, percentage, the what the seller number not So is let's typical when would about, maybe tariff you gets terribly a sound right? it time that the it's itself, facing XX% large what if how against throw is which as of a the the the you XX% and to the not to product entire and sense? applied of be tariff. or especially It's percentage to fraction XX% tariff think the the a which by about would we're of margin in becomes as retailer, So question a considering about of

Matthew Koranda

I rest I think of have mine we'll Yes, the Maybe it. mechanics offline around the tariffs. take of

Operator

Capital Ryan comes Street question Lake from Your Markets. next Meyers with

Ryan Meyers

well you expectation. the here, we that third about we you that for that both you mean, gave guidance for the if QX curious, if in came quarter think gave Just ahead here, guidance think I obviously, of

So see shown kind next quarter of beat even maybe in of come the doing? at have you to guide guys of need maybe sort to the end history what high a would you like or for of

Erica Wei

question. Thank the you for

So there's the a big market component how of that is performs.

very So a is participants entirety given number covering [ e-commerce, major to ], channels really exposure large are have furniture right? really of it that our we market when all comes that

Obviously, we're would partially growing newcomers with clients. of -- softness that our be and the very, any very but by is experienced quickly additions, by that offset by new all

suppliers, of directly how performs, us. impact that depending answer retailers, your their the how question, the to market are So results how would on all in quarter, the the

Ryan Meyers

Okay. Got it.

where that maybe like mainly sounds of downside. of it kind So of is or kind it's a a that would upside just type demand lot thing drive

Erica Wei

big of a it. That's part

Ryan Meyers

Yes. Okay.

how guys you are we 'XX. the as especially margin in should making, But provide on investments as makes there's some bit just nuances side Okay. there'll if of in then expecting that commentary It QX little it be margin think far in of sense. the XXXX, margins should of does kind that maybe we you here. a what show initiatives And be kind sounds on of like can some

Erica Wei

a don't or bit. know but can the we sure we about what of you maybe color kind Ryan, give So a typically seeing beyond-the-quarter I'm or talk year-long we're guidance, little

positive to hard exactly make would still little to beginning definitely expect it do when that newly in, the term, But we including in strong side it's maybe going of year, House, to expect what things the to front. better see that's our think comes right? Noble be from there tougher this on As on everybody, to we We margin at market, including So bigger margins next us. a are come near the SKUs happen. it the say developed headwinds for going point

of including going depend economy housing for to the and number we the year, really it's especially us. market. later that the a the could doing If on Towards differences there, is of demand drive demand things, how the side, up see

Operator

Your Thomas Maxim comes next Forte with question from Group.

Thomas Forte

Great.

So I off, team, I'll the time. quarter. Larry questions. and five have at first one congrats a on go

adding So ability new items? to categories as as ramping equipment exercise you the is, categories about talk question the grow business first bulky such parts other or versus auto the can such by existing home

Erica Wei

the Iman, want for take thanks question. Tom, to one? you that

Iman Schrock

Absolutely.

we basically, billion wholesale the about that that on for right as furniture kind have to TAM a the small is front the And $XX to the comes like a a So we're furniture math you of will year. of fraction alone, show TAM. it discuss quick of now. When presenting industry back-of-the-napkin could

is of runway. So nonstandard big absolutely, there's the for lot products. optimized bulky a And and platform

categories meaningful furniture the So dialed furnishings, in and in the the the core by same trickle default. time, more are because starting are to a so player while focus becoming industry at on in we're other they not home

Thomas Forte

Okay. second you talk And what's question, about the in my Europe? growth impressive driving then can for

Erica Wei

that take Tom, I'll one.

in what nowhere Europe, United is. still So near is small right? -- we're States Europe is the scale The quite

is where attracted a also So fallen enough place, infrastructure a we've and have ourselves. entered phase line. kind at good in things we've for attention of The

small with So combining small denominator, very do that's outlook right? or growth. those positive year-over-year very, fast factors on And there, quite the we base a feel

market market. in actually adds on fragmented provide to the We close could it really of add much how the feel value it to a be like of which And seems Europe to to potential little more, is, is in U.S. terms terms how size GigaCloud quite

good So for us. there hopefully, things

Thomas Forte

of wanted July. then years, addition Amazon in for which then had saw fall is Target, you from example, in talk to big usually And June, to impacting in for as that a sales? see others big Walmart last forward X is the at sales others, one, do it And pull do Great. your How, you if about as my all, October. Or see and I And results? you October in having accretive? Prime that next has sales Day, kind

Erica Wei

the a the are kind seasons earlier and not this little compared year a feels this of any softer, it's the hitting necessarily of see, board, list. of folks. names we -- that it's The part see you of some time year promotions and So that holiday channels recurring across and we of to that mentioned limited to lot specific more

year So is where be in things very develop depends terms kind what the say land it forward, to hard it would how impact of exactly we pull a on and It's next right of now. early here. from

Thomas Forte

All right.

very So last following M&A on you current the strategic give two, your thoughts date? you've had to deals successful can

Erica Wei

Yes, absolutely.

side. always the our is interested that like the kind the There's for we're I'd that the to are buckets on right businesses X call opportunities. product existing we to target So be of, on X complements a Bucket going in. it, lookout

portfolio target the connections that in and our a enhance nicely market both and a in and side channel will So the offerings from terms supplier fit perspective. product of on

additions It's broadened has Knight of nice here. think that So also presence market Also, as House example. a are good little. Christopher very a Noble our such brands

The long-term second our a goals. that technology helps target be category would us execute

So that brick-and-mortar reach bit us someone better. and both the little a is market would this understand help

So Wondersign here a good is example.

is we're bucket Third in interested Europe.

and very happen the are So confident good will that now our market, and future. in fastest-growing Europe, right things obviously, we is

more and perspective, terms looking that help for a connections infrastructure in that of us little a locally. growth our from will target we're So accelerate

Thomas Forte

your freight for pricing my And question, your costs. can the talk incremental then about pass ability you on last and to

any wondering of and on ability any freight I if pricing You specific you power have to identified, but that. costs, think, I pass was some

Erica Wei

Yes.

we version short do. yes, and direct is, So

of now, But very it's products margin. a ocean demand, is conditions and the consider in of the you're I right? However, strength important to topic market always a think, balance. the Tom, thinking right sequential very, specifically, it's the on So And freight market little of decline harder.

there thing important is... keep to So in mind

Thomas Forte

or I like quarter, the a believe. million comment you in Yes, that $X something fourth I think gave specific on like

Erica Wei

Right. Oh, Yes. I see.

So that's to ocean ground referring freight. not delivery,

the On lot doing more... ocean freight we're front, a

Thomas Forte

Okay.

ability So to price offset inflation of on [indiscernible] to costs? any the take that freight

Erica Wei

So now to necessarily we cost extent right don't and there feel costs going the best volatility limiting is time pushing front to we Alternatively, downstream. is managing be to like focusing our strategy on this on more the the be can.

similar that entail and would our contracts with working how did strengthening we partners So and us to ocean relationships with different freight. there,

Operator

There further remarks. at I'll for time. this closing Ms. questions back to hand Erica Wei are no

Erica Wei

bright you, even our joining looks call to today. our investors. bring and The -- everyone, participants to for as we marketplace everyone thank extremely more So the work future to bring value

hesitate you next don't if questions. quarter. reach the Thank again in take to additional meantime, to you care. speak our out But have will We and to team you

Operator

does our for today. participating. for you conference Thank That conclude

You now disconnect. may

GigaCloud Technology (GCT) 8 Nov 242024 Q3 Earnings call transcript